Best Stocks to buy
These are the stocks that analysts say investors must have in their portfolio now that their latest fundamental results have been released.
Mondelez, Airbnb, DexCom, Microsoft, and Insulet are among them.
According to investment firm Susquehanna, while Airbnb shares are down 2.1 percent this year, shareholders should not be concerned.
Indeed, the firm believes that now is the time to purchase shares of the online travel website company.
“Despite the volatility from COVID variants, we still like it,” analyst Shyam Patil said following the company’s recent earnings.
“ABNB again outperformed expectations in the second quarter, driven by a massive increase in travel demand,” he added.
While the company warned about the uncertainty surrounding the variants during its earnings call, Patil was unfazed.
“Although COVID-19 continues to provide significant headwinds to both ABNB and the travel industry as a whole,” he wrote, “ABNB is showing strong signs of recovery — gross bookings increased 37 percent over 2Q19 levels.”
Patil also predicted that Airbnb’s third-quarter revenue would be its highest ever.
“However, given its strong positioning and promising long-term opportunity, we believe ABNB is a must-own stock for the recovery,” the firm said.
According to William Blair analyst Jason Ader, Microsoft is “firing on all cylinders.”
In late July, the tech company reported strong fourth-quarter earnings, exceeding expectations on both the top and bottom lines.
“Though this quarter had easy comps,” he said, “revenue growth of 17 percent and commercial cloud revenue growth of 31 percent were both impressive for a business of this scale.”
Ader added that the “long growth runway” is not yet complete.
“Microsoft 365 (Teams, EMS demand), Azure (strong consumption), LinkedIn (hiring and advertising rebound), and Gaming (new Xbox consoles all contributed to the beat,” he wrote.
Though Ader admits the stock may be overpriced for some, he believes it is one that investors should have in their portfolio.
“While valuation remains rich (by any measure), we continue to believe this is a must-own name for tech investors given Microsoft’s stellar financial profile, expanding enterprise wallet share, and sustainable competitive advantages in the cloud,” wrote the firm.
Microsoft’s stock is up 6.8 percent this month.
According to JPMorgan, the insulin management company released its second-quarter earnings earlier this month, beating on both the top and bottom lines, but may have left investors wanting more.
“We expect investors to be disappointed by these results, primarily due to the smaller-than-expected beat and (2) a delay in U.S. Omnipod 5 approval, limited launch, and full launch,” said analyst Robbie Marcus.
The Omnipod 5 is the company’s long-awaited and latest automated insulin system for diabetes patients, which is expected to be available in limited quantities sometime in the fourth quarter, according to the firm.
However, Marcus added that shareholders should look past what he called a “modest” earnings report and see it as a one-of-a-kind buying opportunity.
The medical technology sector has a track record of outperformance, which should excite investors, according to the firm.
“We believe Insulet is a must-own stock in 2021, as continued pharmacy tailwinds combine with the launch of Omnipod 5, the most significant product launch in the company’s history and potentially one of the largest in MedTech overall next year,” Marcus wrote.
This month, the stock is up 5.5 percent.
Outperform rating for DexCom – Baird
“The second quarter was as solid as it was clean, as management’s investments in DTC, sales force, product-line expansion, and so on are increasingly paying off….” Bottom line, given the numerous catalysts and growth drivers that we believe still lie ahead for DXCM, we believe the company’s 20 percent+ revenue and likely even faster earnings growth potential over the coming years makes this a must-own stock for long-term medtech investors, and we currently see upside potential for this stock into the low $500 range over the coming year, with our current 12 month price target.
JPMorgan Insulet, Overweight rating
“We expect investors to be disappointed by these results, owing to the smaller-than-expected beat and a delay in U.S. Omnipod 5 approval, limited launch, and full launch….” Following the more subdued results, management reiterated full-year revenue guidance of +16-20 percent, a level we see as prudent due to pipeline delays and achievable as business momentum continues. We believe Insulet is a must-own stock in 2021, given the company’s continued pharmacy tailwinds and the upcoming launch of Omnipod 5, the most significant product launch in the company’s history and potentially one of the largest in MedTech overall.”
Susquehanna, Airbnb, Positive rating
“Despite the volatility of COVID variants, we still like it. ABNB once again outperformed expectations in the second quarter, owing to a significant increase in travel demand. The increasing spread of new COVID variants, on the other hand, is likely to make the travel recovery highly volatile and non-linear, making near-term trends difficult to predict. Having said that, we believe ABNB is a must-own stock for the recovery due to its strong positioning and promising long-term opportunity. Despite the fact that COVID-19 continues to be a significant headwind for both ABNB and the travel industry as a whole, ABNB is showing strong signs of recovery – gross bookings increased 37 percent over 2Q19 levels.”
William Blair, Microsoft rating for outperformance
“Despite the fact that this quarter had easy comps, revenue growth of 17% and commercial cloud revenue growth of 31% were both impressive for a company of this size. Microsoft 365, Azure, LinkedIn, and Gaming all contributed to the beat. Microsoft’s success in newer product areas such as security, compliance, and collaboration reinforces our belief that the company has a long growth runway. While the valuation remains high, we believe this is a must-own name for tech investors given Microsoft’s stellar financial profile, expanding enterprise wallet share, and long-term competitive advantages in the cloud.”
Overweight rating for Mondelez – JPMorgan
“We continue to view MDLZ as a must-own stock within our coverage universe, particularly for investors with long time horizons. With most other food producers still facing significant margin risk from inflation over the next two to three quarters, MDLZ stands out as a relatively dependable story, in our opinion, with its limited inflation, inflation potentially peaking in 3Q21, and strong pricing power in many markets.”
Shall you buy Tesla, AMC and airlines?
According to their crowded put positions, the so-called smart money is betting against a handful of stocks in force, including Tesla, meme stocks, and some reopening plays.
InsiderScore examined newly released quarterly 13-F filings from hedge funds to determine where professional speculators placed their bearish bets. The research firm examined all 13-F filers and concentrated on funds with a put position on a specific stock worth more than $5 million.
Put options give investors the right to sell a predetermined amount of an underlying security at a predetermined price within a predetermined time frame.
Hedge funds also bet against companies by selling short their shares, but these positions are not disclosed in regulatory filings.
Michael Burry of Scion Asset Management, a “Big Short” investor, was one of the most vocal Tesla detractors.
The investor also opposes Cathie Wood’s Innovation ETF (ARKK), which has Tesla as its top holding.
Hedge funds are still targeting AMC Entertainment and GameStop after massive short squeezes this year, though short interest has dropped dramatically.
Anchorage Advisors, 683 Capital Management, KG Funds Management, and Ellington Management Group were all bullish on the movie theater chain. Sessa Capital Investment Management, Hound Partners, and others backed away from the video game retailer.
The so-called FAANG stocks were also among hedge funds’ most despised names. To be sure, some of these option positions may serve as hedges against large stakes.
After outperforming the market in 2020 as investors flocked to internet-related businesses and megacap safety, some of the market’s biggest tech names began to lag this year. Amazon is down 2% in 2021, while Netflix is roughly flat year on year.
In other news, the hedge fund community predicted that the popular reopening trade would begin to unwind. According to InsiderScore, many of them had positions against American Airlines, United Airlines, Carnival, and Boeing at the end of the second quarter.
Hedge funds’ best stocks list, according to Goldman Sachs
The hedge fund VIP list is made up of the 50 stocks that appear the most frequently among the top-10 holdings of fundamental hedge funds. According to Goldman, the list has a good long-term track record of outperforming the broader market, but it has lagged the S&P500 over the last six months.
Hedge funds typically take larger positions in their favorite plays, with VIP bets being critical to fund performance.
“Although hedge funds are currently less concentrated in their top positions than they have been in recent years,” the Goldman note said, “the typical fund has over 60 percent of long equity assets in its top 10 stocks, underscoring the importance of VIPs for overall hedge fund returns.”
The most popular holdings were, as expected, megacap technology stocks such as Apple and Amazon. However, some of the new additions indicated that hedge funds may have increased their exposure to certain thematic or sector strategies during the second quarter.
According to a Goldman Sachs report, hedge funds increased their bets on two semiconductor stocks during the second quarter, with Nvidia and Advanced Micro Devices joining the VIP list. The companies join Micron and Maxim Integrated Products as popular chip picks among hedge fund managers.
The list also shows that hedge funds increased their positions in some of the key stay-at-home plays even when Covid-19 cases were significantly lower than they are now. During the second quarter, Peloton, a fitness company, and Shopify, an e-commerce platform, joined the VIP list.
Three stocks tied for the most top-10 holdings appearances among the new VIPs, with 19 each. Nuance Communications, Willis Towers Watson, and Frontier Communications Parent are the companies in question.
This year, Nuance has outperformed the broader market, but Willis Towers has fallen precipitously since early May and would likely be a significant hit to hedge funds that haven’t sold their positions. During the second quarter, Frontier emerged from bankruptcy proceedings.
A look into John Rogers’ portfolio
According to Morningstar, the Ariel Fund’s investor class shares have gained more than 25% this year, easily outperforming both the broader market and the fund’s mid-value peers. He also outperformed his style peers in 2020, despite the fact that growth stocks outperformed even the best value funds.
Despite the fact that the stock market has steadily risen since its pandemic low in March 2020, Rogers has repeatedly said that he still sees value in certain sectors of the market.
Ariel’s holdings indicate that he is placing a large bet on the financial sector. The fund has significant holdings in Lazard and KKR, implying that Rogers and his team can expect investment bankers to be very busy in the coming months.
This year, KKR has been a big winner for the fund, rising roughly 56%.
First American Financial, a title insurance company, is another financial stock in the fund’s top ten. Rogers said in March that the company had “gotten really cheap,” and the stock has risen roughly 30% since then.
Ariel also has media deals with ViacomCBS and MSG Entertainment.
Interpublic Group has been the sector’s best performer so far this year, rising nearly 55 percent. The ad market rebounded strongly in 2021 as businesses weathered the worst of the U.S. economic shutdowns and live sports returned to television.